The battle between low-cost carrier (LCC) and full-service (FS) airlines for market dominance is set to intensify, with an increasing number of low-cost long-haul routes launched or planned for the coming decade.
The issue was one of the hottest topics debated at last year’s World Travel Market (WTM) 2015 in London.According to the WTM 2015 Industry Report, a 'low-cost long-haul revolution in aviation' is under way, with more than 80 per cent of senior executives surveyed by the report predicting significant number of low-cost trans-Atlantic flights – one of the world’s most competitive routes – in the coming years.Icelandic operator Wow Air recently launched one-way trans-Atlantic services via its Reykjavik hub for $150, linking London with Canada and the East Coast of the US.Other carriers, including Norwegian, Canada’s WestJet, Germany’s Condor and Paris-based XL Airways France, also offer or plan to launch trans-Atlantic routes.The success of Gulf-based LCCs flydubai and Air Arabia, which offer services to Europe, Asia and Africa, demonstrates the popularity of the low-cost model with Middle Eastern consumers.Rising competition between LCC and FS airlines and its impact on broader industry trends also led discussions at this year’s WTM conference.Presenting the findings of INK Media’s Global Passenger Survey, the company’s director of Research, Kevin Miller, said there was a clear divide in terms of passenger expectations of LCC and FS airlines, particularly in the long-haul market.Miller said FS airlines were still largely operating according to the traditional airline model, whereby passengers made their booking decisions based on brand loyalty, in-flight experience, overall service and price. By comparison, bookings in the LCC long-haul market were solely driven by price.'After price, service is the most important factor influencing a customer’s decision to book with an airline. Ultimately, passengers are looking for long-haul value,' he said. 'There is little expectation of added value [in regards to LCC long-haul carriers].'According to INK’s research, overall satisfaction with FS carriers in Europe was declining, but increasing for LCC airlines.'Full-service carriers prioritise quality service, but this isn’t to say low-cost rivals are ignoring this as a factor,' said Miller.Speaking on the same panel, Helgi Mar Bjorgvinsson, senior vice-president, marketing and sales at Icelandair, argued that it is 'price and the quality of service that matters' to the consumers. 'How do we meet the expectations of our customers? One of the biggest issues for us is transparency. Customers do not face additional charges when they book with us. This is our key to surviving in this very competitive environment.'Rafael Schvartzman, regional VP Europe IATA, said the biggest issue facing its members was competing on price. 'Price sensitivity in Europe is especially high,' he said. 'As a deregulated market, competition is strong. Scheduling and flight times also play a role in booking decisions, especially in terms of punctuality, as do frequent flyer programmes, particularly for regular flyers.'Nat Pieper, senior vice-president, Europe, Middle East and Africa, for US carrier Delta, argued beyond price, building customer loyalty was the number one priority for FS airlines. 'The question for me is how do you build a loyal customer going forward? Punctuality is the key, as are service quality and standards. The inflight experience is also important – in-flight entertainment, new seats, service. In the US, loyalty is critical. 'The customer [demographic] all full-service airlines are competing for are high-yield passengers. One of the ways to endear loyalty [with this demographic] is to give them the service they expect. Our highest yielding passengers are accruing miles, but there are privileges that come with that, whether it be ticket upgrades or lounge access.'One of the more serious areas of concern for all airlines was social media’s relatively minor role in influencing airline booking decisions.According to the INK research, despite the millions of dollars being invested by airlines in ramping up their social media presence, marketing campaigns distributed via Twitter and Facebook had little to no impact on the purchasing decisions of customers. It also found little commercial value at present in airline booking apps.'Social media has a negligible effect on airline re-bookings in the US and Europe,' claimed Miller. 'Price is still the number one differentiator for low-cost carriers in Europe.'While the airline panellists did not question INK’s findings, they did agree that a significant online presence was a mandatory requirement for any competitive airline.'Airlines must have a decent website, no question,' said IATA’s Schvartzman.'The question is, how much are we going to invest in digital, not what platforms we’re going to use,' added Bjorgvinsson.For Delta’s Pieper, a significant online presence 'has become a mandatory facet of the travel experience for our customers'.'There’s no more efficient booking channel for us,' he said, describing Delta’s website. 'Social media is also a tremendous channel for generating brand loyalty,' he added, noting that it provided the airline with the fastest means of dealing with disgruntled customers 'on the odd occasion when we screw up'.By Gemma Greenwood
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LCCs to boost in-flight wi-fi adoption
A new study from Juniper Research has found that the adoption of in-flight wi-fi by budget airlines will provide a boost to the connected in-flight entertainment market, driving the number of connected commercial aircraft to over 10,400 by 2020. This will represent over a threefold increase from an estimated 3,200 this year.
The new research, In-Flight Entertainment & Wi-Fi Connectivity: Market Prospects 2015-2020, found that the decreasing costs of standalone in-flight wi-fi hardware, which will soon be offered as line-fit equipment by major aircraft manufacturers, will for the first time make connected in-flight entertainment attractive to low-cost airlines flying short-haul routes.
The research also noted that rather than using traditional embedded seatback screens, many budget airlines are adopting the BYOD (Bring Your Own Device) approach. Here, passengers are allowed to use their own devices on-board the aircraft to stream airline owned content, thereby reducing hardware costs and weight.